Opec will stick with its policy of not constraining output and has all but abandoned its official production target at its semi-annual meeting, risking a further drop in oil prices that are currently close to six-year lows.
After a marathon seven-hour session that ended in chaotic scenes outside the Opec secretariat in Vienna, the only agreement reached by the cartel members was to meet again in June.
The group’s official communiqué made no mention of its existing output target of 30m barrels a day, saying only that it would continue to “closely monitor developments’’.
“We cannot put a [production] number on it now,” said Abdalla El-Badri, Opec secretary-general, after the meeting. “Iran is coming back. So we decided to postpone the decision until the next Opec meeting, when the picture will be clearer.”
Reports earlier in the day claimed that Opec would raise its production ceiling to 31.5m barrels a day. But it later transpired that this was the level Opec ministers had pegged as the group’s current output level. Although delegates say raising the ceiling was discussed, it did not result in an official target increase. Analysts say production is even higher, adding that targets are meaningless if individual country quotas are not adhered to.
The group has been increasing output since November last year when Saudi Arabia led the cartel in resisting calls to cut output in the face of rising supplies from rival high cost producers.
That decision upended the oil market and has seen prices slump by more than 40 per cent to levels last seen in the aftermath of the financial crisis. Brent, the international oil marker, fell 1.7 per cent to $43.11 a barrel after the meeting, while US crude oil dropped below $40 a barrel.
“I didn’t have any other expectation,” said Iran’s oil minister Bijan Namdar Zangeneh as he left the meeting. “We didn’t decide to do anything. I hope at the next meeting we can reach agreement.”
Expectations of higher exports and production from Iran next year when sanctions are expected to be lifted is one reason why the cartel has not been able to reach an agreement on an output target.
Earlier in the day, Mr Zangeneh said limiting Iran’s output was “not a matter of negotiation”.
Divisions within the producers’ group were evident at the pre-meeting press conference.
Venezuela’s oil minister said he would table a proposal for the group to reduce output by 1.5m barrels a day to try to bolster the price. But Saudi Arabia has resisted calls to reduce supplies because other large members such as Iran — and non-Opec producers like Russia — have declined to co-operate.
“We are looking for stability in the market, we are really worried,” Venezuela minister Eulogio del Pino said. “The price was $60 at the last meeting [in June], it is $40 now.”
Nigerian oil minister Emmanuel Ibe Kachikwu, who is the Opec president, said “everything was on the table” during the seven-hour meeting.
Although the price crash has decimated the budgets of Opec’s members, especially the most economically fragile, it has slowed the growth of US shale, oil from Canada’s tar sands and other high-cost production. How production outside the cartel responds to prices over the next six months is also under consideration.
“For the first time in many years Opec has failed to specify a production ceiling and has decided to wait on events in 2016 before making its next move,” said Neil Atkinson of Lloyd’s List Intelligence. “This is a holding decision.”
“They have abandoned the pretence that they are producing 30m barrels a day and formalised the decision taken a year ago to produce as much oil as necessary to preserve market share while leaving prices to the market place.”
Mr Kachikwu suggested the group could convene again before June in what would be an extraordinary meeting for the cartel. “We want to watch the market a little bit more and meet anytime between now and June and decide on what to do.”
Robert Minter, a strategist at Aberdeen Asset Management Investment, said: “The meeting was a bit of a disaster. It ran well overtime, failed to set a numeric ceiling on production and reaffirmed the sovereign right to produce as countries wished.”
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